The Bangladesh Textile Mills Association (BTMA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) have opposed a government proposal to hike source tax on export revenue and have demanded reduction of the rate to a rational one to encourage investment and retain competitiveness.
The proposed 150 per cent hike in source tax came at a time when export-oriented spinning and weaving mills are making neither profit nor loss while profitability of some others ranges between 3 per cent and 5 per cent, Tapan Chowdhury, president of BTMA said in a statement.
"The proposed 1.5 per cent source tax from existing 0.6 per cent will weaken the financial structure of the mills thus hindering normal activities of those units," he said.
Chowdhury also said that this would also reduce the local millers' competitiveness in the domestic market.
“As a result, there will be no local protection or investment in the industry that would also obstruct the employment generation,” he said in the statement and demanded a rational rate of source tax.
In a separate statement, the BKMEA said, "The proposed 150 per cent hike in source tax will lead the knitwear industry especially small and medium-sized units towards uncertainty."
The knitwear industry has been facing a tough time in recent times as the cost of doing business has increased following gas price hike, devaluation of local currencies against dollar while prices of locally-made apparel products declined by 2 to 4 per cent in the EU and the US, said Salim Osman, president of BKMEA.
Source tax is applicable to sales, not to the profit and the proposed 150 per cent hike in source tax will also hamper export earnings in the emerging markets and the move to diversify markets, Osman said demanding continuation of existing 0.60 per cent rate.
He pointed out that production cost of knit products would increase by 36 to 50 per cent if proposed 5.0 per cent duty on import of different raw materials from existing 3.0 per cent is implemented.
The BTMA also urged the government to withdraw 3.0 per cent source tax on bill payments of purchase through local letter of credit. (SH)
Fibre2Fashion News Desk – India